Wall Street – short term traders with no foresight

The market’s exploding today on news that sales of existing houses were up 5.2%. The end of the recession! Hooray! Okay, but these happy campers aren’t looking at the figures. 30% of the sales were short sales – sales for less than the loans owed on them. 9.24% of all mortgages in this country are delinquent, with an additional 4.3 per cent already in foreclosure. That combination, 13.5%, is the highest rate of delinquency since record keeping of such matters began in 1972.

Foreclosures in Massachusetts were initiated in July at a rate 5X greater than in July 2008. Similarly, foreclosures in Rhode Island are “rampant”. That huge jump in Southern California homes came about from the average price dropping 23% from last year, with foreclosure sales representing over 45% of all sales. Seeking Alpha looks at the huge default rate on prime loans: good credit, 20% down, etc. and fears the future because these are defaults caused by unemployment, not just the inevitability of poor folks who never could afford the home the government urged them to buy:

As you can see, everything is fine, no problems at all. The markets are sure to continue its steepest market rally ever rising 49% since march, outpacing the 1929-1933 44% rally. I guess the new normal of a high unemployment, revenue-less, earnings-less, and growth-less recovery means that the markets can have the greatest percentage gain ever, in only 5 months, and should continue forever. I am kidding of course, this thing looks ugly and makes me question what is really going on.

So take what you want from today’s euphoria. Personally, I have certain amount of respect for Wall Street players to make money, but almost none for their ability to see past the day’s trading horizon. I think someone’s going to be proved a chump here, and soon.

5 Comments

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5 responses to “Wall Street – short term traders with no foresight

  1. Anonymous

    Market is hardly a monolith

    All investors/traders are not created equal, as divergent net worths (and long/short positions) prove

  2. out looking in

    Dear Chris-

    Please see my post from Monday when you showed the gruesome down move. “Option expiration week shenannigans” I wrote. Break em down (the futures), pick up calls, and ramp up the futures. The trend is up, and the morons that sold from 800 on down to 666 are piling back in above 900. They are afraid of missing the 54% advance (oh wait, I think they already did!). Market will roll over after September 3rd (for educational purposes only). Then we will test the moxy of the newborn bull. But hey, a few trillion here, a few trillion there- some of it had to end up in the market, because banks are making many loans….where’s the money gonna go?

  3. Inagua

    The stock market is at 2002 levels, just like Greenwich non-waterfront houses. What’s irrational about that?

  4. Tradervic

    Really? Greenwich home prices are at 2002 levels? I thought it was much worse than that to get a transaction done. Do any of your smart readers, or you yourself Chris, have any data on this? Thanks!

  5. Scotia

    I think you are absolutely right. It reminds me of last year before we fell off a cliff. Not good. Not good at all.